Canadian dollar falls to 7-month low against U.S. dollar amid growth concerns

Canadian dollar falls to 7-month low against U.S. dollar

Canada’s dollar weakened to the lowest level in almost seven months against its U.S. counterpart amid concern the world’s 11th-largest economy is slowing.

The currency fell versus the majority of its 16 most-traded peers as crude oil, Canada’s biggest export, and an index of commodities dropped. Reports due Feb. 22 will show that the nation’s retail sales declined and inflation slipped to the lowest in more than three years, according to Bloomberg News surveys of economists.

“Economic pressures are on the rise in Canada, that’s one of the main things pressuring the loonie,” Joe Manimbo, a market analyst at Western Union Business Solutions, a unit of Western Union Co., said by phone from Washington. “There is some data Friday that investors are nervous about which may highlight growing concerns about underlying fundamentals in Canada.”

The loonie depreciated 0.6% to C$1.0168 per U.S. dollar at 12:34 p.m. in Toronto. It touched C$1.0174, the weakest since July 25. One Canadian dollar buys 98.35 U.S. cents.

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Canada’s government bonds were little changed. Benchmark 10-year debt yielded 2.02% as the price of the 2.75% security due in June 2022 fell 6 cents to C$106.10.

Bond Auction

The Bank of Canada auctioned C$400 million ($394 million) today of inflation-indexed bonds due in December 2044, drawing a median yield of 0.615%. At its last offering of the real- return bonds, on Dec. 5, the central bank sold C$700 million of the securities at a median yield of 0.3%.

Today’s sale attracted $1.195 billion in bids. Auction coverage, a ratio that gauges demand by comparing the amount bid with the amount sold, was 2.99. That compared with 2.59 at the December auction and an average of 2.71 at the past four sales.

Canada’s dollar has fallen 1.5% this year among the 10 developed-nation currencies tracked by the Bloomberg Correlation-Weighted Indexes. The U.S. dollar has gained 1.1%, and the euro has jumped 2.6%.

“The longer we stay above the C$1.01 level, it allows the loonie bears to feel more positive about their position,” Dean Popplewell, a currency analyst at Oanda Corp., said in a phone interview from Toronto. “In the short term, there’s a good chance we could penetrate the C$1.02 upper-echelon, and we may see the loonie ease off ahead of the sales figures on Friday.”

Canada’s retail sales fell 0.3% in December after rising for five consecutive months, according to the median forecast in a Bloomberg survey of 22 economists before Statistics Canada reports the data.

Consumer Prices

The consumer price index increased 0.6% in January from a year earlier, a separate Bloomberg survey showed before the report. It was 0.8% in December, the lowest level since October 2009.

Bank of Governor Mark Carney reiterated to lawmakers last week in Ottawa that an increase in the benchmark interest rate, which has been 1% since 2010 to spur growth, is less urgent because inflation has been slower than forecast and will stay below the 2% target rate through mid-2014. The bank pared its 2013 growth forecast last month to 2%, from a 2.3% estimate in October.

Employment in Canada unexpectedly fell in January for the first time in six months, decreasing by 21,900 jobs, Statistics Canada data showed on Feb. 8. Manufacturing sales dropped more than estimated in December, losing 3.1%, a report on Feb. 15 showed.

Commodities Fall

Standard & Poor’s GSCI Index of 24 raw materials dropped 1.2% today. Crude oil for March delivery slid 2.1% to $94.64 a barrel in New York and reached $93.92, the lowest since Jan. 17. Raw materials including oil account for about half of Canada’s export revenue.

The loonie may have weakened too much, too fast, and be due to strengthen, a technical measure indicated. The currency’s 14- day relative strength index against the U.S. dollar was 27.3 today, below the 30 level some traders see as a sign that an asset may be about to reverse direction.

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